(Reuters) - Puerto Rico’s governor-elect pledged Tuesday to not scuttle a $2.57 billion deal to privatize the island’s Luis Muñoz Marín International Airport, saying voiding a signed contract would hurt its credibility among international investors.
Gov.-elect Alejandro Garcia Padilla of the Popular Democratic Party campaigned against public private partnerships, in which government assets are leased out to private operators, unless such deals created public works that governments cannot afford to build.
Garcia Padilla a week ago narrowly defeated Republican Gov. Luis Fortuño of the New Progressive Party, who championed PPPs as a way to jump start Puerto Rico’s long-stalled economy. Fortuño also cut government spending and laid off some 30,000 government workers in austerity moves encouraged by Wall Street.
Garcia Padilla’s victory created doubts about the airport deal being completed and other parts of Fortuño’s economic program.
“There is a signed contract and I have to uphold the credibility of the Puerto Rican people before the world. I need the people who have come to invest to invest,” Garcia Padilla said in a video interview with the El Nuevo Dia newspaper.
Garcia Padilla, who said he was working to prevent possible ratings downgrades of Puerto Rico’s bonds, added: “What I won’t allow is that this contract (to be) used to increase the costs of services for the public or to fire workers at the airport.”
Fortuño’s administration in July struck a 40-year deal worth $2.57 billion in cash and improvements with Aerostar Airport Holdings LLC to run Luis Munoz Marin airport, the largest in the Caribbean. The deal is awaiting final approval from federal regulators.
The airport privatization was the second large PPP deal for Puerto Rico in as many years. In 2011, Puerto Rico undertook a 40-year concession for toll roads PR22 and PR5 worth over an estimated $1.8 billion.
Garcia Padilla also said he was “fighting so that (ratings agencies) don’t downgrade our bonds by the end of the year. The deficit and debt has increased so much that our bonds are in danger of being downgraded.”
Standard & Poor’s Ratings Services said last week there was a 33 percent chance that Puerto Rico’s credit ratings could be downgraded. S&P rates the island’s general obligation debt BBB and its appropriation debt BBB minus.
Reporting by Reuters in San Juan; additional reporting and writing by Michael Connor in Miami, editing by Gary Crosse